Student Loan... what to do with it?

TomCon_2

I have decided after much umming and arring, that I will get the maintenance loan. (I started uni last September after a gap year).

Now, what do I do with the money? At the moment I am thinking of saving it in an ISA and see what comes from it.

Any other ideas?

Thanks,
Tom

whitfreak

An ISA is a good start, in general put it somewhere earning a good interest rate (i.e. above the interest rate being charged) but that you can still get at it. You could think about drip feeding it into regular saver but that does lock your money up.

The fact that you say that you've been umming and arring about it, leads me to presume you dont have other expensive debt knocking around. But if you so you'd save more in the long run paying those off.

TomCon_2

Hi WF, thanks for your reply.

You're right, I don't have any debts.

The main thing I was thinking is that it might be good to put towards a deposit on a flat / house when I qualify in 3 and a bit years. Obviously it will depend on the financial situation in 2012 but if it works out that I would be just as well putting it towards a deposit (I am saving my own money as well).

I think the ISA is the simplest option; A & L have a 3% variable one at the moment which isn't too bad in the current climate.

Thanks again, it has just clarified to me that what I was thinking was along the right lines.

Lokolo

I save my student loan.... thats how I got the amount I do

Rikki

Ideally you need to find an ISA paying more than you are being charged on your student loan.

There are ISA's for 16 to 25 years olds in mind.

Also I would look for a fixed rate ISA if you can.

rb10

The Golden Rule:

Make sure that whatever savings account you choose, it's paying at least the rate you are being charged on your loan.

At the moment, the loan rate is 2.5%, but it's likely to fall to 2% early next week.

farso

Hi.

ISA's dont really maximise return from what I have seen. The point in an ISA is to shield your money from tax, however as a student you are already tax exempt. Prob better looking elsewhere.

I currently have 4% from Alliance&leicester, but at the start of this uni year i put a large amount in a fixed bond at 7.05% However, most ISA's dont go anywhere near these values.

Shop around, and be kind enough to share your findings!

Thanks

Masomnia

I'd still get an ISA, you only have once to use this year's tax free allowance, so I'd make the most of that. Then you'll have a much larger pot of money accruing tax free interest when you do get a job and are paying tax.

You'll ultimately have to decide what's best for you.

farso

I guess it all depends what your long term plans for the money are. Id prefer to have a larger amount of money after graduation as I dont plan on hanging onto my cash as Ill need a house & newer car etc. That makes the tax free status of my money kind of useless.

whitfreak

Farso has a point. Its worth looking at normal savings accounts, as the rates may be better. But all this also depends on whether you work and earn near the yearly tax fee limit (about 6k now I think). Once your money is in an ISA its tax free forever, but if your going to spend all of it a few months after graduating (car/house deposit/whatever) and your not really earning while studying then by all means expand the number of products your looking at.

I personally disagree with fixed rate bonds, but thats just because I like to be be able to get hold of the money at short notice. Most of it is my emergancy fund after all.

TomCon_2

Thanks for all your comments.

I am quite close to my tax limit with my part time job, so I think that the ISA is probably the best option for me at the moment.

Thanks again,

Tom